2. Graph the supply and demand of a good that is both produced domestically and imported. Assume that the country is not large enough to affect the world price. Illustrate the effects of a tariff on imports. Discuss the following: a. Income distribution effects b. Resource allocation effects c. Domestic production and consumption effects d. Government revenue effects e. Price of the good effects

2. Graph the supply and demand of a good that is both produced domestically and imported. Assume that the country is not large enough to affect the world price. Illustrate the effects of a tariff on imports. Discuss the following: a. Income distribution effects b. Resource allocation effects c. Domestic production and consumption effects d. Government revenue effects e. Price of the good effects

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following image shows the market for wheat for the country of Palatino. sº is the domestic supply of wheat, and DD is the domestic demand for wheat. Suppose the world price of wheat is $9 per bushel. Suppose a specific tariff of $6 is imposed on each bushel of wheat imported. The net welfare loss from the tariff is represented by the area Figure 19.4 SO Price($) 25 H 15 A E DD 200 300 600 700 Quantity of Wheat (thousands of bushels) a. B and D b. I and H O c. E O d. F e. A and C
Price of Carnations $14 12 10 8 6 4 2 100 200 300 400 500 Tariff Refer to Figure #2. Opening trade but without the tariff, the domestic price and domestic quantity demanded are $4 and 500 $4 and 100 $6 and 200 $6 and 400 Domestic Supply World Price Domestic Demand 600 Quantity of Carnations (in dozens)
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a. In the absence of trade, what is the equilibrium price and equilibrium quantity? b. The government opens the wheat market to free trade and U.S enters the Turkish market, pricing wheat at $40 per ton. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will be imported from U.S? c. The government imposes a $10 per ton tariff on all imported wheat. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will now be imported from U.S? d. How much revenue will the Turkish government receive from the $10 per ton tariff?
2. The impact of a tariff Consider a hypothetical example of trade in aluminum between the United States and China. For simplicity, assume that China is the only source of U.S. aluminum imports. The following graph shows the U.S. market for aluminum. Note that in the absence of any trade, the market price for aluminum in the United States is $500 per tonne, and the equilibrium quantity is 250 million tonnes per month. Use the green area (triangle symbol) to show U.S. consumer surplus under free trade with China, and use the purple area (diamond symbol) to show U.S. producer surplus under free trade with China. 1000 Domestic Demand Domestic Supply 900 Consumer Surplus 800 700 Producer Surplus 600 500 400 Free Trade Price 300 200 100 200 250 300 350 400 450 500 50 100 150 QUANTITY OF ALUMINUM (Millions of tonnes per month) PRICE (Dollars per tonne)
1. Welfare effects of free trade in an exporting country Consider the New Zealand market for lemons. The following graph shows the domestic demand and domestic supply curves for lemons in New Zealand. Suppose New Zealand's government currently does not allow international trade in lemons. Use the black point (plus symbol) to indicate the equilibrium price of a tonne of lemons and the equilibrium quantity of lemons in New Zealand in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium. NOTE: for the drop down question. the optionfs for first 2 are (increases or decreases), and the last drop down question is (loss or gain)
3. Import quotas Kazakhstan is a grape producer, as well as an importer of grapes. Suppose the following graph shows Kazakhstan's domestic market for grapes, where Sx is the supply curve and Dx is the demand curve. The free trade world price of grapes (Pw) is $800 per ton. Suppose Kazakhstan's government restricts imports of grapes to 120,000 tons. The world price of grapes is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of grapes with a quota of 120,000 grapes. PRICE (Dollars per ton) 4000 3600 3200 2800 2400 2000 1600 1200 800 400 0 --‒‒‒‒‒‒ 0 40 SK DK Pw 80 120 160 200 240 280 320 360 400 QUANTITY (Thousands of tons) SK+Q Price…
The European Union has a "variable levy" on imports of butter. This means that when the world price of butter goes up. O The EU must have increased its tariff on butter. O The EU reduces the size of the tariff that it levies on butter. O Consumers of butter in the EU benefit. O Cows in the EU get angry.
H3.
Korea’s demand for computers isQK = 2, 000 − PkIts supply isQK = −200 + PkChina’s demand for computers isQC = 1, 000 − Pc Its supply isQC = Pc1. Suppose that Korea imposes a specific tariff of $100 on computerimports. Calculate the price of computers in each country and thequantity of computers supplied and demanded in each country. Alsocalculate the volume of trade.
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The following graph shows the domestic supply of and demand for soybeans in Guatemala. The world price (Pw) of soybeans is $540 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. TRICKY YALL 855 820 PRICE (Dollars per ton) 785 750 715 680 645 610 575 540 Domestic Demand 105 0 40 A Domestic Supply Pu NO 120 160 200 240 260 320 340 400 QUANTITY (Tons of soybeans) If Guatemala is open to international trade in soybeans without any restrictions, it will import Suppose the Guatemalan government wants to reduce imports to exactly 160 tons of soybeans to help domestic producers. A tariff of tons of soybeans. per